Personal Portfolio Update: Decreasing Gold & Increasing Bonds

A little adjustment in an environment of higher rates.

This very short post is simply to document a recent decision I made with respect to my personal portfolio.

Decreasing Gold - Increasing Bonds & Cash

As I have documented in several articles, we are in a period of rising interest rates. Further, I believe this will continue for at least a little while longer. The Fed has held true to their "higher for longer" mantra, and of late the market has more than once gotten a little ahead of itself, believing a "pivot" to be imminent, only to be disappointed.

As a result, the returns on both cash and bonds are a lot more attractive than they were even 6 months ago.

In such an environment, gold becomes a little less attractive, as it produces no current income. For that reason, I have made the decision to remove the 3.5% allocation to gold shown in my year-end 2022 update. I have allocated roughly half the funds from the sale of my shares in BAR, IAU, and SGOL into AGG, a top-quality U.S. total market bond fund. I put the remainder into cash, which is also generating a nice, and growing, return of late.

As an aside, I might note that, despite some recent weakness, the value of my gold-backed ETFs has held up relatively well over the last year or so as compared to other asset classes.

Basically, then, I am trading from an asset class that has held up reasonably well into one that has been substantially depressed. In the short term, given the decent dividends currently being generated by AGG, the amount of income the portfolio generates will increase. Further, AGG offers potential for capital gains at some future point, if and when the Fed is eventually able to lower interest rates.

Since this was a fairly significant adjustment, I wanted to share it with readers now as opposed to waiting for my Q1 update. I hope my thinking is of some use as you consider your personal situation.